Asian stock markets exhibited mostly positive trends on Tuesday, following the upward momentum seen in U.S. stocks, where increases in prominent technology firms balanced declines in oil and gas shares.
Japan’s Nikkei 225 index climbed 0.5% during early trading, reaching 38,819.51. Meanwhile, Australia’s S&P/ASX 200 saw a 0.6% rise, hitting 8,270.20. In South Korea, the Kospi index fell by 0.2% to 2,606.70, while Hong Kong’s Hang Seng index increased by 0.4% to 20,690.07. Conversely, the Shanghai Composite index saw a decline of 0.4%, settling at 3,308.46.
In recent economic data from Japan, unemployment for the previous month was reported at 2.4%, a slight improvement of 0.1 percentage point, marking the second consecutive month of recovery. The persistently weak yen is currently supporting the strength of Japanese stocks. In currency markets, the U.S. dollar saw a decrease, trading at 152.96 yen, down from 153.23. The euro stood at $1.0815, down slightly from $1.0817.
On Wall Street, the S&P 500 managed to rise by 0.3%, recovering after facing its first losing week in six weeks, while still staying close to its record high achieved earlier in the month. The Dow Jones Industrial Average experienced a 0.6% gain, and the Nasdaq composite increased by 0.3%, now just 0.4% shy of its peak set in July.
Notable increases in several major technology companies, including Apple and Meta Platforms, bolstered these gains. This week, five out of the “Magnificent Seven” tech firms are set to announce their quarterly earnings. These tech giants have dominated Wall Street for an extended period, reaching such market influence that their performances can significantly shift the S&P 500 index.
Having previously experienced a downturn due to concerns over inflated stock prices in relation to their earnings, firms like Alphabet, Meta Platforms, Microsoft, Apple, and Amazon face pressure to deliver substantial growth.
On the other hand, shares in the oil and gas sector experienced declines, impacted by falling oil prices. Exxon Mobil’s stock dropped by 0.5%, while ConocoPhillips experienced a 1.2% decline.
In Asian energy markets, benchmark U.S. crude prices rose by 27 cents, reaching $67.65 a barrel, while Brent crude, the international benchmark, increased by 23 cents to $71.65 per barrel. This followed a significant decline on Monday where both U.S. and Brent crude prices plunged by 6.1%. This decline coincided with heightened tensions following Israel’s military actions against Iranian targets, which were less severe than some investors anticipated, yielding a sense of relief regarding potential escalation.
Amidst the ongoing conflict, financial markets remain concerned about the possibility of an intensified conflict in the Middle East disrupting crude oil supplies from Iran, a major oil producer. Earlier in October, Brent crude had soared close to $81 per barrel, despite indications that ample oil supplies exist for global needs. Prices have since corrected to below $72.
Additionally, markets are navigating the usual turbulence associated with the approach of a U.S. presidential election, now just one week away. Historically, this period tends to be volatile in financial markets, though they typically stabilize afterward, regardless of the election outcome.
This volatility impacts both stock and bond markets. In the bond sector, Treasury yields have seen a rise, adding to significant month-to-date gains. The yield on the 10-year Treasury escalated to 4.28%, up from 4.24% recorded late Friday, a noticeable increase compared to approximately 3.70% seen at the start of October.
The increase in yields follows a series of reports indicating a stronger-than-expected U.S. economy. This situation offers optimism for Wall Street, as it suggests that the economy may avoid a deep recession amid rising inflation concerns. However, it also puts pressure on traders to adjust their expectations for interest rate reductions by the Federal Reserve, which is now equally focused on sustaining economic growth as it is on curbing inflation.
Consequently, the upcoming U.S. jobs report scheduled for release on Friday may become the focal point for the markets, potentially overshadowing even the high-profile earnings from major tech firms. Investors are keen to identify more evidence of robust job growth, which would support the optimistic narrative of a soft landing for the economy.
Overall, the S&P 500 increased by 15.40 points, closing at 5,823.52. The Dow gained 273.17 points, finishing at 42,387.57, while the Nasdaq composite rose by 48.58 points to settle at 18,567.19.